Home
Legal Advice
Revenue
What are the provisions for tax relief and support during financial hardship?

What are the provisions for tax relief and support during financial hardship?

01-Dec-2024

Revenue

Answer By law4u team

In India, there are several provisions for tax relief and support during financial hardship, primarily designed to help individuals and businesses facing economic difficulties. These provisions include: Income Tax Relief: Tax Deductions: The government offers various tax deductions under sections like 80C (for investments in life insurance, PPF, etc.), 80D (for medical insurance premiums), and 80E (for education loans), which can help reduce taxable income. Rebate under Section 87A: A tax rebate of up to Rs. 12,500 is available to individuals with taxable income up to Rs. 5 lakh. Deferral of Tax Payments: Extension of Due Dates: In times of financial distress (such as during the COVID-19 pandemic), the government has extended the due dates for filing income tax returns and paying taxes. GST Payment Extensions: For businesses affected by financial difficulties, the government often announces extensions for GST payment deadlines and reduced penalties for delayed filings. Rescheduling of Loan Repayments: Loan Moratorium: The Reserve Bank of India (RBI) has allowed a moratorium on loan repayments during periods of economic distress (e.g., the COVID-19 pandemic), which can help ease immediate financial pressures. Income Tax Exemptions for COVID-19 Related Support: Exemption for COVID-19 Medical Treatment: The government has exempted income received from medical treatment or insurance payouts related to COVID-19 from tax. Exemption for Donations: Donations made for COVID-19 relief have been eligible for deductions under Section 80G. Support for MSMEs (Micro, Small, and Medium Enterprises): Easier Access to Credit: The government has introduced schemes like the Emergency Credit Line Guarantee Scheme (ECLGS) to provide financial relief to MSMEs. Interest Subvention Schemes: These schemes aim to provide financial support to small businesses by reducing the interest burden. Tax Benefits for Charitable Donations: Contributions to charitable organizations or relief funds, such as the PM CARES Fund, can qualify for deductions under Section 80G. These provisions are intended to provide immediate financial relief and support during periods of economic hardship, and the government periodically announces new measures in response to emerging challenges.

Answer By Anik

Dear Client, In India, the law provides several tax relief and assistance provisions under financial crises. Most of these provisions are defined under the Income Tax Act, 1961. It is an effort to provide relief to the taxpayer who is facing actual financial troubles. 1. Tax Relief Programs • Tax Deductions and Credits: Various tax deductions and credits are available that help lower the total tax burden. Deductions provided under Section 80C to invest in particular savings instruments reduce taxable income. • Standard Deduction: Taxpayers may take a standard deduction on their income, which reduces taxable income and tax liability. 2. Hardship Provisions under the Income Tax Act • Waiver or Reduction of Interest: Under Section 220(2A) of the Income Tax Act, waiver or remission of interest upon outstanding payment may be requested by taxpayers who commit certain missed tax payment deadlines should they meet specific conditions: • Financial Hardship: The taxpayer has to prove that interest payment causes real financial hardship. • Uncontrollable Delay: The delay in payment should result from circumstances beyond the control of the taxpayer. • Cooperation: The taxpayer should have fully cooperated with tax assessments or related proceedings. 3. Currently Not Collectible Status: Taxpayers having serious financial difficulties may be eligible for "Currently Not Collectible" status with the IRS-or its equivalent in India. Under this status, collection activities can be temporarily stopped pending an improvement in the taxpayers' financial situation. 4. Offer in Compromise: Taxpayers may apply for an "Offer in Compromise," allowing them to settle their tax debts for less than the full amount owed if they can prove that they cannot pay the full amount due to financial hardship. 5. Relief for Natural Disasters: Taxpayers affected by natural disasters may receive special relief measures, including extensions for filing returns, waivers of penalties, and deductions for losses incurred due to such events. 6. Installment Agreements: Taxpayers can request installment agreements with the tax authorities, allowing them to pay their tax liabilities over time rather than in a lump sum. This can ease financial pressure during difficult periods. Conclusion The provisions for tax relief and support during financial hardships in India are designed to assist individuals and businesses facing economic difficulties. By offering options such as interest waivers, deductions, installment agreements, and special relief measures, the law aims to provide a safety net for taxpayers struggling to meet their obligations while ensuring compliance with tax regulations. Taxpayers experiencing financial hardship should consider consulting with a tax professional to explore these options effectively. Hope this answer helps you.

Answer By Ayantika Mondal

Dear Client, Tax regulations have provisions for various reliefs when an individual or a business is under financial stress to ease burden bearing. These support systems of tax laws involve exemptions, deductions, deferment, and government schemes. 1. Tax Relief for Individuals During Financial Hardships A. Deductions and Exemptions 1. Income Tax Act, 1961 - Section 80C to 80U: Deductions of investments (like PPF, ELSS, life insurance), medical expenses, education loan, and disability. 2. Medical Expenses-Deduction is allowed under Section 80D, 80DD, and 80DDB for health insurance of self or dependents or specified illnesses. In respect of senior citizens without insurance, medical expenditure of up to ₹50,000 can be allowed. 3. Disability Benefit (Section 80U and 80DD): ₹1,25,000 deductions for people with a disability or dependent family members with disabilities. 4. Interest on Education Loan: The Section 80E claims allow for interest on education loan payable and can be claimed for 8 years. B. Exemptions related to Relief Payments 1. Gratuity and Compensation: Gratuity, retrenchment compensation, or Voluntary Retirement Scheme (VRS) are exempted up to specific limits under Section 10. 2. Provident and Insurance fund withdrawals: Normally, matures proceeds from life insurance or PPF are exempted from income tax. 3. COVID-19 Relief: Payments of ex-gratia related to COVID-19 treatment or death exempt from tax, subject to a notification by the Central Board of Direct Taxes. C. Tax Refunds and Carrying Forward Losses 1. Loss Carry Forward (Sections 70-80): Business or capital losses can be carried forward for set-off against future income. 2. Refund of Excess Tax Paid: Income tax return can also claim refund for any excess advance tax or TDS paid by a person. 2. Tax Relief for Businesses During Financial Hardships A. Deferment and Instalments for Tax Payments 1. Installments for Tax Dues: Taxpayers can request payment of outstanding tax liabilities in installments under Section 220(3) of the Income Tax Act. 2. Interest Waivers or Reduction: Authorities may reduce or waive interest and penalties for delayed tax payments under Section 119(2)(a). B. Loss Adjustments and Relief: 1. Carrying Forward Business Losses (Section 72): Business losses can be carried forward for up to 8 years to offset against future income. 2. Depreciation Set-Off (Section 32): Unclaimed depreciation can be carried forward indefinitely and adjusted against taxable income. 3. Procedural Reliefs A. Income Tax Settlement Commission: Taxpayers facing difficulties can approach the Settlement Commission for resolving disputes and reducing penalties. B. E-Verification and Simplified Filing: Simplified online processes for refunds, rectifications, and reassessment provide procedural ease. C. Appeals for Waivers: Taxpayers can appeal to the Assessing Officer or higher authorities for a waiver of penalties and interest in genuine hardship cases. Conclusion The law provides a range of tax relief measures to individuals and businesses facing financial hardships, including deductions, exemptions, deferments, and targeted schemes. These provisions are designed to mitigate financial stress while ensuring compliance with tax obligations. Seeking timely legal or professional advice can help maximize these benefits. Hope this answer helps you.